Budget sequestration

The meat cleaver we need

IN HIS failed effort to prevent the automatic, across-the-board budget cuts known as "the sequester" from going into effect, Barack Obama warned of the inability of such a "meat-cleaver approach" to distinguish between a "bloated program" and a "vital service", and he made a list of chilling, specific predictions about the vital services that would falter. As David Fahrenthold and Lisa Rein of the Washington Posttell it,

There would be one-hour waits at airport security. Four-hour waits at border crossings. Prison guards would be furloughed for 12 days. FBI agents, up to 14.

At the Pentagon, the military health program would be unable to pay its bills for service members. The mayhem would extend even into the pantries of the neediest Americans: Around the country, 600,000 low-income women and children would be denied federal food aid.

But none of those things happened.

Mr Fahrenthold and Ms Rein examined what actually happened since sequestration kicked in on March 1. They found that of the administration's 48 dire prophecies, half have not come to pass, while the jury's still out on 13. When one looks at the the 11 predictions that have panned out, only a small handful provide cause for serious concern.

One of the basic ideas of political economy is that the costs of any particular government programme are diffuse, spread over the entire (present and near-future) taxpaying population, while the benefits of the programme are concentrated on a relatively small class of beneficiaries. Even large cuts in most specific programmes will save the typical taxpayer at best a few pennies, yet even small cuts can hit a programme's beneficiaries—administrators, contractors, subsidy recipients, etc—very hard. This asymmetry in the burdens and benefits of programmatic spending creates a corresponding asymmetry in political motivation. A few cents is hardly enough to grab taxpayers' attention, but one can count on most programmes' beneficiaries fighting tooth and nail against cuts. So, other things being equal, nothing gets cut, and government grows and grows.

Though the costs of any given programme are quite diffuse, the burden of government spending, taken as a whole, is by no means small change for the typical taxpayer. A cut in aggregate spending therefore stands to benefit many taxpayers enough to make a real difference, even when he or she takes into account losses as the beneficiary of certain programmes. On the other side of the equation, few of us see ourselves as direct beneficiaries of aggregate government spending, except in an abstract or theoretical way. Furthermore, special interests are accustomed to competing, not cooperating, for shares of the budget, so one tends not see recipients of nutritional assistance banding together with engineers from General Dynamics to mobilise against across-the-board cuts.

In other words, if we're ever going to cut spending in a serious way, we may need "meat cleavers" to do it.

That said, big, dumb, indiscriminate across-the-board cuts in reality turn out not to be as dumb or indiscriminate as they look. Politicians and bureaucrats, once faced with a settled fact of constraint, often find a way to do what they really consider important. As Mr Fahrenthold and Ms Rein report:

In some cases, agencies dug into their budgets and found millions they could spare. In other cases, Congress passed a law that allocated new funds or shifted money around. In others, lawmakers signed off on an agency’s proposal to “reprogram” its money.

In the process, the “meat cleaver” of sequestration often became a scalpel. It spared crucial programs but cut second-tier priorities such as maintenance, information technology, employee travel and scientific conferences.

This is why many of Mr Obama's direst warnings have not panned out.

But some of them have. A number of not-very-expensive programmes specifically for the poor have not fared well. Rental assistance for the rural poor has been cut, as have some emergency unemployment benefits. This might reflect the fact that politicians don't care enough about poor or jobless voters to save their benefits. But then, defence programmes have taken the biggest hits, and we know politicians care about them. To those of us who believe that America is prone to start wars just because it can, reductions in American "military readiness" come as humanitarian good news that may well offset the bad news about transfers to the needy. In any case, I don't know of another way to put such a dent in America's lavish spending on its war-making capacity, and I'm glad that it has happened.

Of course, the sequester was ill-timed, and has probably hampered America's economic recovery. That shouldn't stop us from drawing some general lessons from the experience, though. Meat cleavers work, and they aren't in practice so indiscriminate as they may seem to be. They focus attention, clarify priorities, and lead to the swift discovery of previously unimagined economies. That the effect of the sequester has been relatively benign so far strikes me as a data-point in favour of relatively inflexible fiscal rules, such as debt-ceilings and balanced-budget amendments, capable of somewhat offsetting the diffuse-cost/concentrated-benefit dynamic that otherwise drives democracies toward imbalance and ruin.

Like I said, our scumbag pols love to hand out tax breaks and spending to special interests while putting the bill off to the younger generations they don't care about in a future they don't care about.

When the future arrives, they refuse to allocate the resulting pain so they can stay in office robbing us indefinitely. Unless they can pretend to do it by accident.

Which is how taxes got increased, and spending got cut. The only way it would have happened.

Does this make moral sense, economic sense, social justice sense, or even legal sense? No. Does it make political sense. Yes.

And the blackmail they have used for 35 years -- let us sell off even more of your children's future or we'll make it even worse for you now -- had to be called sooner or later.

Blackmailed by Wall Street, with their demands for deregulation and bailouts. Blackmailed by the public employee unions, with their pension increases, tax increases ands service cuts. Blackmailed by executives demanding lower pay and benefits. Blackmailed by the politicians. Enough!

Reminds me of quote: "The boat ride was very uneventful until we went over the falls.." The Sequester is a just the kind of dumbness we Americans now accept so readily, short-term simpleton answers to long-term complex problems.

On C-Span, heard the wife of a Afghan vet, now a civilian defense specialist, ask a Republican Congressman if he was going to sacrifice 20% of his salary, to fix the deficit, as was her family. The man's disrespect for this woman, bordering on disgust, was criminal. Not an acknowledgement of the question. Not an answer.

"cut second-tier priorities such as maintenance"
That is valid only as a VERY short-time expedient, since the effect of lack of maintenance is cumulative over time, and what one could get away without for the first quarter is NOT tolerable on the fourth, third, or even second quarter.

A dumb meat cleaver might be a good idea but the sequester isnt one. Bloated healthcare and unfair tax subsidies (eg mortgage interest tax relief) along with a bunch of other stuff was excluded and could have done with being targeted the most.

I am reminded of California's Proposition 13 some 30 years ago. The predictions were far more dire, and all agreed that Armageddon was on its way.

Except one lone Los Angeles Times voice in the wilderness who predicted that nothing would happen (and was instantly scoffed into silence). And nothing did happen. At least for a while.

Some deadwood was actually pruned, but the bureaucracies quickly found ways to increase "user" fees to protect themselves in the short term.

Long term they learned to get politically active, using the initiative process to get their budgets written into the state constitution (teachers), passed full employment acts for their members ("3 strikes" for the prison guards), and supporting an electoral map gerrymander that beggared belief. Term limits didn't hurt either, as senior staff found they could easily outmaneuver their green legislators.

Don't ever underestimate the ingenuity of a bureaucrat protecting his turf. It took over 15 years, but the ever implacable bureaucrats clawed back their budgets, then a lot more. And gave less value to boot. Our educational and crime statistics are worse than ever. Today California has among the highest total state taxes (and higher than pre-Prop. 13), yet can't keep the lights on, with a legislature now powerless over spending.

So, prop 13 was a long term roaring success if you're nose deep in the public trough. Not so for for the poor sods footing the bill. Especially if their kids are in public schools.

May the feds fare better. The "meat cleaver" approach hasn't turned out that badly so far. If unlike California, Congress keeps its hands on the chequebook, the bureaucrats will have to fight each other, leaving the citizens alone. Sort of a Darwinism set loose in the budget. Not an entirely bad concept.

Perhaps we need a couple more such whacks. But strike quickly. Bureaucrats are addicted to their budgets more strongly than a heroin junkie. Given enough time, they will find a way to feed their habit.

Did you read the article RoyFan? Because the data point to the fact that the sequester worked in forcing government to actually prioritize.
Read the article again tiger...you failed to get what the facts about the situation actually showed. But some folks don't care about facts. Their view of the world is fixed and no facts will disrupt that view. Are you one of those people?

"Our educational and crime statistics are worse than ever."
Guy, you ought not to pull such things out of your, er, hat. A quick Google check would lead you to numerous web pages that allow you to check actual, you know, facts, such as this http://www.ppic.org/main/publication_show.asp?i=1036, from the non-partisan Public Policy Institute of California 2013, which notes that "California’s crime rate has been declining since 1980 and is now below the national rate."
Tragically, you're right about the decline of a once-proud state education system... what's wrong is just your bash-the-bureaucrats attempt to deflect that part of the blame attributable to H. Jarvis and his ilk.
Anyone interested in a quick review of Prop. 13 might wish to view http://economix.blogs.nytimes.com/2013/06/04/proposition-13-at-age-35/ written by Bruce Bartlett, who held senior policy roles in the Reagan and George H.W. Bush administrations. (GOP'ers are not my usual go-to sources, but not all of them are complete sophists....) In that essay, this jumped out at me:
"The third important development leading to Prop 13 was a state Supreme Court decision, Serrano v. Priest, which equalized per-pupil school spending in the state. This meant that the higher taxes homeowners paid no longer benefited their own children. According to research by William A. Fischel, an economist at Dartmouth, the strongest support for Prop 13 came from school districts adversely affected by Serrano."
The ugly side of California....
I part ways with Bartlett when he propagates the myth that "Many Californians were literally being taxed out of their homes." Ah, no. The rapidly-rising property values in California in the late 70's made property owners richer - which nobody complained about - but made their property taxes go up - which, of course, lots of people complained about, human nature being what it is. (I'm reminded of Lucy from Peanuts: Lucy, in the Peanuts cartoon, once said, "I don’t want ups and downs. I want ups and ups and ups!" We can guess what party Lucy joined as an adult, right? But I digress....) Some Californians on fixed incomes cashed out rather than pay the tax increase (they could have borrowed against the increased equity, but it's a free country, no?), but the Jarvis tear-jerk meme of old folks forced - forced I tell you! - into selling the family homestead was... well, it was brilliant propaganda, but only that.

Sequestration has turned out to be a wonderful thing for the American taxpayer, albeit in the sense of "even a blind squirrel finds a nut every once in a while" sort of way. Congress and the President, in an otherwise avoidable collision of ineptitude and impotence, serendipitously created a good thing without even intending to. Think of it as the primordial "Big Bang" of fiscal responsibility.

This whole sequestration has simply been a variation on "zero based budgeting", which at one point had been advocated by Jimmy Carter. As impractical as zero-based budgeting actually is when applied to public expenditures, this sequestration effectively accomplished the exact same goals -- forced belt tightening made Agencies go line by line through their budgets to separate the critical from the non-critical. I love this so much I think the sequestration should be extended for 100 years instead of 10, or simply made permanent (and, without a tinge of irony, I proudly proclaim that I actually WORK for the federal government at an entity that was forced to engage in major budget cuts).

I reside in Pennsylvania near a number of federal facilities where civilian employees are facing reduced work weeks and pay checks. What frosts me is the flow of pay and benefits to the elected representatives and senators continues undiminished. If those in authority can't manage the public purse they should feel the pinch too.

Though this may come as a surprise to the financially illiterate, most budgets for most government agencies and organizations are flexible. Also, money is a fungible resource. Across the board budget cuts have always been maligned by big government types in Washington, but the only alternative seems to be no cuts at all. The financial meat cleaver is a bad idea whose time has come.

Someone once said: If the government had only 2 responsibilities
1. Keeping terminally ill children alive and
2. Digging holes
Which services would they cull first if cuts were needed?
Keeping terminally ill children alive of course, because then the people would say, why were you spending our money on digging holes.
The government has to go through this charade as a matter of course, then it can be seen as all vital and necessary. I’m not American, but seriously any basic search which tells you the size of Federal departments shows you the vast majority have no purpose:

Postal Service 800,000 privatise and sell, get off the books.
Department of Veterans Affairs 240,000 cut to 100,000
Department of the Treasury 162,119
cut to 50,000
---------
Department of Agriculture 100,000
Department of the Interior 58,026
Department of Commerce 41,711
Department of housing and urban development 9,300
Equal opportunities commission 3,055
All sacked not needed in a free market economy
-------------------
Social Security Administration 65,000 All sacked and people given money back in form of government bonds
---------------
Department of Health and Human Services
All sacked except a few to deal with epidemics that type of thing
----------------
Environmental Protection Agency 18,879
Sacked with exception of people who deal with externalities
---------------------------------------------
Department of Education- Sacked send back to states- clearly failed centrally planned institution.

I'm really not even trying FBI, CIA, homeland security not even mentioned: who knows, maybe you could get back to the constitution at this rate :)

While I think the article makes some good points and I support the kind of non-hysterical objective analysis, there is one thing that concerns me.

And that is the continued trend toward making economoc evaluations based on short term benefit instead of looking at the long term picture. E.g. cutting maintenance budgets looks good in the short run but not so good in the long run. And without objective analysis, none of us know whether short term savings are truly savings or just deferred spending.

I'm not saying this is the case here, only that a more thorough analysis is needed before declaring whether the sequester was positive or not.

To be fair to the W.W., his/her response was primarily to Obama's projections of immediate damage and on that criteria, the article is fair. I just think the rest of us should also be focusing on the long term.

The sequester speaks in favor of reduced spending and smaller government.
Let the governments stay out of the way and let the free markets and the private sector function (at 2.5 times the efficiency). Texas is a great example, with no state taxes, a booming economy, and less than 4% unemployment.

“In some cases, agencies dug into their budgets and found millions they could spare."
Wow, shocker. I guess the GSA people decided to downgrade from caviar to jumbo shrimp. Must've required some pretty deep digging on everyone's part, given that the overall federal budget is already 50% larger than it was just six years ago.
This was never a big deal. It wasn't even a real budget cut. Obama is a deceitful, cynical lying gasbag, and I wish Americans and this newspaper would wake up to that fact instead of pretending that he's a reasonable human being. He's just another piece of garbage from the political toxic waste dump that is Chicago.